February 24, 2014

Impact of Paid Search on our Decisions

Let's say you are an email marketer. You send five email campaigns a week to customers who love to "engage" with "relevant" content.

If you do your job well, you cause an unanticipated by-product.

You cause your customers to use search to compare your merchandise to what other folks offer. When this happens, you must incorporate the cost of paid search in your email (and catalog) circulation decisions.

Here's an example. You're running email mail/holdout tests, right? Right?! Take a look at the difference between the mail group and the holdout group, when it comes to paid search.
  • Mail Group = $1.00 spent on paid search.
  • Holdout Group = $0.80 spent on paid search.
This tells us that 20% of paid search expense (I know, it's more complicated than this, and there are new customers using paid search, but come one, follow along for a moment) is caused, yes, caused by email. Take email away, and you eliminate the habit of the customer going out to search for competing merchandise.

Here's where things get interesting. In the real world, you must allocate the $0.20 of paid search demand back to your email marketing program. And, you must allocate the expense associated with paid search back to your email marketing program as well.

Now, across the top 20% of the email subscriber list, this has no impact whatsoever.

But among the 80% of the email subscriber list that spends almost nothing?

Here, paid search expense results in two or three email contacts per week, not five.

I know, you're saying, "the difference in profit is irrelevant". But if you're a hundred million dollar business, then this results in several hundred thousand dollars of profit a year.

Why ignore that?